SANMITRA URBAN COOP BANK LTD., Akola V. DY. CIT, AKOLA CIRCLE, Akola

ITA 80/NAG/2015

• Counselvise Citation: [2014] 117 COUNSELVISE.COM (IT) 8858 (ITAT-NAGPUR)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 13-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Set aside
• Section: 145; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH, NAGPUR BEFORE S HRI SHAMIM YAHYA (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 80/NAG/2015 ASSESSMENT Y EAR: 2010 - 11 THE SANMITRA URBAN CO - OP. - BANK LTD., IN FRONT OF TILAK PARK, RAMDASPETH, AKOLA - 444001 PAN : AABTS4051J VS. THE DY. COMMISSIONER OF - INCOME TAX, AKOLA CIRCLE AAYAKAR BHAVAN, MURTIZAPUR ROAD, AKOLA - 444001 (APPELLANT) (RESPONDENT) & ITA NO. 76 / NAG/2015 ASSESSMENT Y EAR: 2010 - 11 THE ASSTT. COMMISSIONER OF - INCOME TAX, AKOLA CIRCLE, FIRST FLOOR, AAYAKAR BHAVAN, MURTIZAPUR ROAD, AKOLA - 444001 VS. THE SANMITRA URBAN CO - OP. - BANK LTD., RAMDASPETH, AKOLA - 444001 PAN : AABTS4051J (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MAHAVIR ATAL (AR) REVENUE BY : SHRI MAHAVIR ATAL (AR) SHRI GITESH KUMAR (DR) DATE OF HEARING: 11 /05 /201 8 DATE OF PRONOUNCEMENT: 15 / 06 /201 8 O R D E R PER RAM LAL NEGI, JM THES E ARE THE CROSS APPEALS PREFERRED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER DATED 31.12.2014 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 4 , NAGPUR, WHEREBY THE LD. CIT (A ) HAS PARTLY ALLOWED THE APPEAL FILED 2 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 BY THE ASSESSEE AGAINST THE ASSES SMENT ORDER PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). ITA NO. 80 /NAG/2015 (ASSESSMENT YEAR: 2010 - 11 ) 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A NON SCHEDULED CO - OPERATIVE BANK ENGAGED IN BANKING BUSIN ESS , FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 34,29,700/ - . SINCE, THE CASE WAS SELECTED FOR SCRUTINY NOTICE U/S 143 (2) AND 142 (1) WERE ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICES , THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS AND FURNISHED THE REQUISITE DETAILS. IT WAS NOTICED THAT THERE WAS A NET ACCRUED UNREALIZED NPA INTEREST OF RS. 41,66,264/ - FOR THE F.Y. 2009 - 10, WHICH WAS DIRECTLY CREDITED TO THE BA LANCE SHEET AND EQUAL AMOUNT WAS CREDITED TO THE OVERDUE INTEREST RESERVE ACCOUNT WITHOUT ROUTING THE CREDIT/DEBIT TO THESE ENTRIES IN THE PROFIT AND LOSS ACCOUNT. SINCE, THE ACCRUED BUT NOT REALIZED INTEREST AMOUNT ON NPA OF RS. 41,66,264/ - HAD NOT BEEN O FFERED TO TAX ON THE GROUND THAT THE ASSESSEE WAS ACCOUNTING THE NPA INTEREST ON CASH/ACTUAL REALIZATION BASIS, THE AO ISSUED SHOW CAUSE AS TO WHY THE ACCRUED INTEREST ON NPA SHOULD BE ADDED BACK TO THE INCOME AS PER THE PROVISIONS OF SECTION 145(1) THAT S UCH HYBRID SYSTEM CANNOT BE FOLLOWED. THE ASSESSEE CONTENDED THAT IT HAS BEEN FOLLOWING THE NORM PRESCRIBED BY THE RBI THAT INCOME/EXPENDITURE IS ACCOUNTED ON ACCRUAL BASIS EXCEPT IN THE CASE OF NPA WHEREAS THE INCOME AS RECOGNIZED ON REALIZATION. HOWEVER , THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND MADE AN ADDITION OF RS. 41,66,264/ - HOLDING THAT THE RBI DIRECTIONS ARE ONLY DISCLOSURE NORMS AND HAVE NOTHING TO DO WITH COMPUTATION OF TOTAL TAXABLE INCOME UNDER THE ACT OR WITH THE ACCOUNTING TREATM ENT. 3 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 3. THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER BEFORE THE LD.CIT (A). THE LD.CIT (A) AFTER HEARING THE ASSESSEE HELD THAT OUT OF THE TOTAL ACCRUED INTEREST ON NPAS OR RS. 41,66,264/ - AN AMOUNT OF RS. 16,21,225/ - ONLY IS LIABLE TO BE TAXED AS INTERE ST CHARGED BUT NOT RECEIVED ON SUCH NPAS WHICH FALLS WITHIN THE PERIOD OF LESS THAN THREE YEARS. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER BEFORE THIS TRIBUNAL. 4. THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD.CIT (A) ON THE FOLLO WING EFFECTIVE GROUND S : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - I ERRED IN REJECTING (PART) THE APPEAL OF THE ASSESSEE BANK WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE BANK IS ELIG IBLE TO ACCOUNT FOR INTEREST ON NON PERFORMING ASSETS (NPA) ON RECEIPT BASIS IN VIEW OF VARIOUS DECISIONS OF HON. PUNE AND OTHER TRIBUNALS. 2. THE LEARNED CIT (APPEALS) - I, ERRED IN NOT ALLOWING NPA INTEREST RS. 16,21,225/ - , WHICH ARE OUTSTANDING BELOW 3 YEAR S. THE LEARNED CIT (APPEALS) - I, ALLOWED ONLY RS. 25,45,039/ - WHICH IS SAID TO BE ACCORDING TO BOARDS CIRCULAR DATED 09.10.1984. THE LEARNED CIT (A) - I, NAGPUR THUS HAS ERRED IN SUSTAINING THE ADDITION OF RS. 16,21,225/ - ON A/C OF ACCRUED INTEREST ON NPA A /CS WHICH ARE OUTSTANDING WITHIN THE SPAN OF THREE YEARS. 3. THE LEARNED CIT (APPELS) - I NAGPUR ERRED IN NOT APPRECIATING THE FACT THAT INTEREST ON NPA CANNOT BE SAID TO HAVE ACCRUED AT FIRST PLACE ITSELF AND THUS THERE IS NO BREACH OF SECTION 145 AS ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. 4. THE LEARNED CIT (A) - I NAGPUR HAS ERRED IN NOT CONSIDERING THE FACT THAT RECOVERY OF INTEREST ON NPA A/CS HAS ALREADY BEEN CONSIDERED AND TAXED BY THE APPELLANT IN THE YEAR OF ACTUAL RECEIPT THEREOF. WITHOUT PREJUD ICE, INCOME OFFERED BY THE APPELLANT ON THE BASIS OF ACTUAL RECOVERY SHOULD HAVE BEEN DIRECTED TO BE DELETED IN RESPECTIVE YEARS. 4 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 5. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED BY THE DECISION OF THE NAGPUR BENCH OF ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10. SINCE, THE ITAT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE AFORESAID, THERE IS NO MERIT IN THE REVENUES APPEAL. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS ALSO FILED CROSS APPEAL AGAINST THE FINDINGS OF THE LD. CIT (A) ON THE GROUND THAT THE LD.CIT (A) HAS ERRED IN NOT ALLOWING NPA INTEREST OF RS. 16,21,225/ - WHICH ARE OUTSTANDING BELOW THREE YEARS. 6. ON THE OTH ER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) DID NOT CONTROVERT THE FACT THAT THE ITAT HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN APPEAL FOR THE A.Y. 2009 - 10. HOWEVER, THE LD. DR RELIED ON THE ASSESSMENT ORDER PASS ED BY THE AO. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE MATERIAL ON RECORD. WE NOTICE THAT THE COORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CAS E ITA NO . 267/NAG/2015. THE FINDINGS OF THE COORDINATE BENCH ARE AS UNDER: - 6. UPON CAREFUL CONSIDERATION I FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S DEOGIRI NAGARI SAHAKARI BANK LTD. & OTHE RS (BOMBAY HIGH COURT AURANGABAD BENCH), INCOME TAX APPEAL NO. 53/2014 & OTHERS, VIDE ORDER DATED 22.01.2015. I ALSO FIND THAT THE ISSUE IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT DECISION IN THE CASE OF THE MALKAPUR URBAN CO - OPERATIVE BANK LTD . ITA NO. 432 & 433 /NAG/2013 AND ITA NO. 452 & 453/NAG/2013 VIDE ORDER DATED 31.08.2015. THE TRIBUNAL IN THE ABOVE CASES HAS CONCLUDED AS UNDER: - RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE SET ASIDE THE ORDERS PASSED BY THE LEARNED CIT 5 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 (APPEALS) IN ALL THESE CASES AND HOLD THAT THE ENTIRE ADDITION MADE IN THE PRESENT CASE ON ACCOUNT OF INTEREST ACCRUED ON NPAS IS NOT SUSTAINABLE. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN TH E SAID ORDER THE ITAT HAS ALSO REFERRED DECISION OF HONBLE JURISDICTIONAL HIGH COURT AS UNDER: - 5. HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE AURANGABAD HIGH COURT, JUDICATURE OF BOMBAY, RENDERED IN A GROUP OF CASES DETAILS OF WHICH ARE AS UNDER - I) CIT V/S M/S DEOGIRI NAGRI SAHAKARI BANK LTD., ITA NO. 53 OF 2014, JUDGMENT DATED 22 ND JANUARY 2015. II) CIT V/S M/S PEOPLES CO - OPERATIVE BANK LTD., ITA NO. 54 OF 2014, JUDGMEN T DATED 22 ND JANUARY, 2015. III) CIT V/S THE NANDED DISTRICT CENTRAL CO - OPERATIVE BANK LTD., ITA NO. 57 OF 2014, JUDGMENT DATED 22 ND JANUARY, 2015, AND IV) CIT V/S VASANDADA NAGRI SAHAKARI BANK LTD., ITA NO. 68 OF 2014, JUDGMENT DATED 22 ND JANUARY 2015. IN THE ABOVE SAID DECISION HONBLE JURISDICTIONAL HIGH COURT HAS ELABORATELY DISCUSSED THE ISSUE AND CONSIDERED THE CASE LAWS ON THE SUBJECT AND HELD THAT THERE WAS NO NEED TO INTERFERE WITH THE ORDER OF THE TRIBUNAL. 8. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS , I SET ASIDE THE ORDER OF LEARNED CIT (APPEALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 6 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 8. THE FACTS AND THE ISSUE INVOLVED IN THE PRESENT CASE ARE IDENTICAL TO THE FACTS AND ISSUE INVOLVED IN THE PRESENT CASE. SINCE, THE COORDINATE BENCH HAS DE CIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2009 - 10 (SUPRA), WE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH ALLOW ALL THE GROUNDS OF APPEAL OF THE ASSESSEE. ITA NO. 76 /NAG/2015 (ASSESSMENT YEAR: 2010 - 11 ) THE REVENUE HAS CHALLENGED THE IMPUGNED ORDER PASSED BY THE LD.CIT (A) ON THE FOLLOWING EFFECTIVE GROUND S : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN HOLDING THAT IN VIEW OF THE CBDT CIRCULAR DA TED 09/10/1984, THE INTEREST ON NPAS WHICH WAS OUTSTANDING FOR MORE THAN 3 YEARS WAS NOT TAXABLE AND CONSEQUENTLY THE LD. CIT (APPEALS) ERRED IN ALLOWING THE RELIEF TO THE EXTENT OF RS. 25.45 LACS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LD. CIT (APPEALS) ERRED IN HOLDING THAT THE BENEFIT OF THE CBDT CIRCULAR 09/10/1984 WAS AVAILABLE TO THE ASSESSEE BANK. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS) ERRED IN NOT APPRECIATING THE CHANGED POSITION OF LAW TH AT THE SAID CBDT CIRCULAR HAD BECOME REDUNDANT AMENDED PROVISIONS OF SEC. 145(1) PRESCRIBING EITHER MERCANTILE OR CASH SYSTEM OF ACCOUNTING STATUTORILY TO BE FOLLOWED BY THE ASSESSEE AND THAT CHOICE OF FOLLOWING THE HYBRID SYSTEM OF ACCOUNTING WAS NO MORE AVAILABLE TO THE ASSESSEE. 4. THE LD. CIT (APPEALS) OUGHT TO HAVE APPRECIATED THE AMENDED POSITION OF THE LAW THAT THE SPECIFIC PROVISIONS WERE INTRODUCED IN SEC. 36(1) OF THE I.T. ACT, 1961 TO ALLOW 7 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 THE CLAIM OF THE BAD DEBTS TO THE ASSESSEE CARRYING ON THE BANNING BUSINESS. 5. THE LD. CIT (A) ERRED IN LAW ON NOT FOLLOWING THE RATIO OF THE HONBLE LUCKNOW ITAT BENCH DECISION IN THE CASE OF M/S HAMIRPUR DISTRICT CO - OPERATIVE BANK LTD. VS. DCIT (25 TAXMANN.COM 306) WHEREIN ON SIMILAR FACTS, THE HONBLE ITAT HAS HELD THAT THE ACCRUED INTEREST ON NPAS WAS BASED UPON THE HONBLE SC JUDGMENT IN THE CASE OF M/S SOUTHERN TECHNOLOGIES LTD. (320 ITR 577). 2. SINCE, WE HAVE ALLOWED THE ASSESSEES APPEAL BY FOLLOWING THE ORDER OF THE COORDINATE BENCH PASSED IN THE ASSSS EES OWN CASE FOR THE A.Y. 2009 - 10 AND HELD THAT THE ENTIRE AMOUNT OF ADDITION MADE IN THE PRESENT CASE ON ACCOUNT OF INTEREST ACCRUED ON NPAS IS NOT SUSTAINABLE, ALL THE GROUND OF APPEAL OF THE REVENUE HAVE BECOME INFRUCTUOUS. HENCE, WE DISMISS THE REVENU ES APPEAL AS INFRUCTUOUS. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE , 2018 . SD/ - SD/ - ( SHAMIM YAH YA ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER NAGPUR, DATED: 15 / 0 6 /201 8 ALINDRA, PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) 4. CIT 8 ITA NO S . 76 & 80 / NAG /2015 ASSESSMENT YEAR: 2010 - 11 5. DR, ITAT, NAGPUR 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PS/PS ) ITAT, NAGPUR